For Tesco Stores, following the money means buying for less to sell goods at lower prices.
That’s the mantra that underlies the mission at Tesco, or what John Hoerner, chief executive, clothing and international sourcing, also refers to as a virtuous price-volume cycle.
“What we do in Tesco is we buy for less. That’s our strategy. We always buy for less and we don’t buy for less so we can keep the money. We buy for less so we can sell for less,” he explained.
Embedded in the business is a plan in which the stores, marketing and logistics team all focus on price and keeping costs low. This allows Tesco to reduce prices, which in turn increases volume. This enables the retailer to continue buying for less. Hoerner’s apparel group is part of Tesco, not a “separate place” within Tesco, he noted.
“We did everything the Tesco way. We sell clothes the same way Tesco sells food. We opened a separate distribution center just for us and we’ve got 325 experienced managers in our stores that actually help us run a clothing department right within Tesco. And we also put a lot more staff in the stores because of the way we run our business. It takes more people to run the clothing business than it does to run Tesco,” Hoerner said.
Ten years ago, the U.K. retailer had sales of 9 billion pounds, or about $16.7 billion. Today, according to Hoerner, the retailer sells in 14 countries with 33.5 billion pounds, or $58.6 billion, in annual volume.
“We’ve invested 14 billion pounds [$26 billion] in buying and extending Tesco’s space and we’ve invested another 2 billion pounds [$3.7 billion] buying existing businesses. Tesco has a very simple core strategy. We have a strong U.K. core to our business, which we keep. We want to be as strong in nonfood as we are in food,” he told the audience.
Its core operations remain in the U.K., where it has 1,900 stores, 97 big hypermarkets, 431 superstores, 161 metro stores and 381 express convenient stores. On the international front, Tesco is now in several European countries: Hungary, Poland, Slovakia, the Czech Republic, Ireland and Turkey. It also has a presence in Asia in Thailand, South Korea, Taiwan, China and Japan.
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